S&N profits fall by £18m as overhaul hits problems

Brewing group Scottish & Newcastle has lost £18 million in profits because of problems with a supply chain overhaul designed to save £46 million a year.

Scottish Courage's profits fell by 8.9 per cent to £186.1 million this year, two years into a supply chain reorganisation that is taking longer than expected to deliver its expected benefits.

No growth is expected in S&N's UK beer division this year.

The parent group is in crisis talks with logistics group Hays to make its distribution and warehouse management more efficient and to keep to its original target of restructuring its supply chain network by next year.

The overhaul, announced in February 2001, aimed to cut inventory by 40 per cent and save £46 million a year by reducing the number of depots and setting up three regional distribution centres.

But S&N warned that high running costs will continue throughout this year as it reverses its original plan to merge stockholding for the on-trade (pubs and restaurants) and the off-trade (retail and off-licences).

A spokesman said the two supply chains proved incompatible: "The problem is that you never get to rehearse these things, and since we combined them, we realised that stockholding has different dynamics in each area."

The group also plans to simplify its brewery production schedules and transfer some operational management to the regional centres.

Earlier this year, the group had to speed up the opening of the third and largest of the regional centres in Thatcham, Berkshire, to avoid "double running" costs with the historic depot network.

In a management re shuffle in the supply chain and operations area, John Gillespie, formerly a projects director, has been appointed distribution director. A new position of commercial director to oversee contract management is soon to be filled.

The S&N spokesman declined to comment on whether there would be jobs cuts apart from internal moves.